- November 13, 2017
- Posted by: lutherpendragon
- Category: insight
With all the furore over ministerial resignations, David Davis’ visit to Poland this week seems to have gone relatively unnoticed. But the meetings with senior Polish Ministers puts into focus the growing importance of the Central and Eastern European or Visegrad group (V4) Member States and the influence they could exert on the Brexit process.
What implications does this have for UK businesses and representative bodies seeking to influence the Brexit process? Many organisations have been busily working over the summer to develop detailed proposals for their respective industries and sectors to help shape the UK Government’s approach to the negotiations. But this is only half the task complete, stakeholders within the EU and importantly politicians and officials within Members States will need to be convinced of these proposals and their benefits.
Much of the focus, quite rightly will need to be on the heavy hitters of the EU; Germany, France and Italy, who will clearly wield much of the influence in reaching the final decisions on Brexit. However, for certain sectors, it should not be ignored that Central and Eastern European economies are making a significant contribution to Europe’s economic recovery and therefore could see a growing influence politically.
No interest in a politics of revenge?
For the UK’s part, Central and Eastern European politicians have been some of the most notable voices in counselling against the punishment of the UK, and perhaps more importantly have begun to articulate different visions for the future of the Union. These ideas have been based on an inter-governmental approach which retains the powers of individual member states, rather than going further down the pan-European route, recently set out in various shades by Jean Claude Juncker and President Macron.
Could their rapid economic progress and the growing importance they have to the success of western European economies, most notably Germany who has its own doubts about greater integration, translate into strengthened political influence amongst their European partners?
Is there an opportunity here for UK stakeholders to build closer ties both politically and economically?
Building bridges with Eastern European politicians could help certain industries and sectors to develop benefits links into the EU negotiating process. There are clearly beneficial issues for both sides regarding trade – the V4 countries rely heavily on the UK market for their exports – and there is a clear dependence for ongoing defence and security support from the UK. Most recently with the deployment of UK troops, reinforcing the defence of Nato’s eastern border.
However, we must also be mindful that many of these Governments are pursing controversial domestic policies, often coming into conflict with other Member States and the EU Commission. The V4 states should not be lumped together, and a nuanced approach will be needed to maximise the benefits of any engagement.
The economic success stories
The V4 are increasingly becoming the economic success stories of the EU, the economies of Poland, Czech Republic, Slovakia and Hungary are all growing rapidly, indeed growing faster than any region in the world with the exception of economies in Asia Pacific.
Their growth is predominantly export led and they are now becoming the go-to location for foreign direct investment in Europe. Poland is now the second most attractive location for FDI in Europe, after Germany. Unemployment is also below the European average and well below levels in France, Italy and Spain, and in all these states wages are rising sharply fuelling greater domestic demand.
Trade with the UK
The export led economies of the V4 have seen the UK become a key market, particularly for their burgeoning manufacturing sectors. Given this significant growth and the expected domestic demand that it will engender, there is clearly scope for the UK to support this growth, particularly in regard to its services sector.
But there is still some way to go. In the Czech Republic goods imports from the UK account for only 2.1% of total imports, resulting in a large surplus for the Czech Republic in 2015 and while UK services exports are higher, it still resulted in a Czech trade surplus. Similarly, Poland enjoys a significant trade surplus with the UK and was the only European economy to have avoided recession between 2008 and 2013. Slovakia’s rapidly growing manufacturing industries also count the UK as a major customer, but again they enjoy a large trade surplus.
Visegrad interests diverging?
Building relationships with the V4 countries will need diplomatic deftness on the part of the UK, particularly as it appears that their interests are increasingly diverging over the level of EU integration and harmonisation they are willing to accept. Most recently Poland and Hungary refused to follow Slovakia and the Czech Republic in endorsing a French-led initiative to tighten regulations on EU labour laws. Added to this domestic policies and economic nationalism in some of these countries has also led to conflict with the EU Commission, most notably in Poland, which again needs to be carefully considered given the wider implications this could have in discussions with western European partners.
Law & Justice has long been a eurosceptic party, and while recognizing that most Poles would never wish to leave the EU, it has not prevented the Polish government from seeking to flex its muscles in questioning greater integration. The recent proposal to extend qualified majority voting for example was been met with opposition.
In the Czech Republic, the ANO party and its populist leader Andrej Babiš, the victor of the recent general election, is something of an enigma, chopping and changing policy, which treads a fine line between retaining national independence and greater EU integration. Initially flirting with the idea of adopting the euro, at the most election in October he rejected eurozone membership and increasingly cautioned against greater integration, despite his MEPs sitting in the most integrationist political grouping in the EU Parliament.
Slovakia by contrast has adopted the single currency and its Finance Minister Peter Kazimir has recently announced his interest in becoming the next Chairman of the eurozone finance ministers. Given the dominance of France and Germany in these appointments it seems unlikely but is sign of the growing confidence of V4 countries in making their voice heard at the highest echelons of EU policy making. Indeed, in reference to the recent V4 disagreements, Slovak Prime Minister Robert Fico has made it clear he doesn’t want Slovakia to be relegated to a second tier of EU countries.
Influence is therefore being exerted in different ways within the EU structure which the UK and organisations seeking to influence the process must be conscious. Other politicians are also seeing the value in closer ties. Austria’s new Chancellor Sebastian Kurz has looked to pivot east, placing a large emphasis on building bridges with the V4 countries. With the Austria taking in the EU Presidency at a critical time in the negotiations, the importance to the UK increases even further.
Ultimately what may bind the interests of the V4 and could aid the UK in the difficult negotiations ahead, is the highly pragmatic nature by which they conduct much of their interactions with the EU. Many in Central Europe worry that the larger western European economies are leading the Union towards greater protectionism, placing their countries at a distinct disadvantage. Surely it is this issue where the UK, seeking to be an open and global trading partner, could have positive engagement.
The road ahead
What can UK business and representative bodies do to try and influence this process? There is clearly an avenue through the European Parliament. The Conservative Party sits in the European Conservative and Reformists grouping with Poland’s governing Law & Justice party as well as the Czech Republic’s Civic Democratic Party (ODS), which gained seats in the country’s recent General Election and may still have influence in shaping the priorities of the next government. Polish politicians such as Danuta Hubner a Civic Platform MEP also hold critical positions within the EU parliament structure, chairing the Constitutional Committee.
Both Polish and Czech politicians within national governments have expressed a desire to act as “go-betweens” in brokering the UK’s exit, with the Czech’s warning that the EU must not seek revenge but take a more pragmatic approach which focuses on the economic and trading benefits of a continued relationship with the UK. Indeed the former interior minister Milan Chovanec suggested that a bilateral deal could be concluded with the UK before the EU talks are concluded, suggesting that the V4 countries are driven more by commercial and economic pragmatism.
These countries primarily joined the EU for pragmatic reasons, to build and grow their markets, develop trade and provide opportunities for their citizens beyond their borders, rather than a deep love for the Grand Projet.
There will of course be difficult conversations along the way, this will not be a silver bullet solution and will not work for everyone. Immigration is a critical factor, the financial settlement given the V4’s continued (although reducing) reliance on EU funding are two critical factors. Added to this, the domestic agendas of some of the V4, taking a more nationalistic direction, are clearly not always aligned to our own and the UK should not be seen to pander to this. But the Realpolitik of the Brexit negotiations means that these new powerhouses of the EU should certainly not be ignored.